Payment processing is something of a pet peeve for me. Getting paid through a site like PayPal is very convenient, but I have to give up 2.9 percent of my income (plus an added 30 cent fee) on every transaction. Consider what that means I’m paying:

Income

Payment to PayPal

$100

$3.12

$1,000

$29.30

$10,000

$290.30

That amount doesn’t seem like all that much, but it only ever goes up even as the expense of having a bank account remains the same. I don’t feel like I get all that much for my money, especially since PayPal doesn’t always protect service providers from scams.

The real reason I still use PayPal at all is because all of my clients are familiar with the company. They mostly have accounts already and don’t have to think about the process of making a payment. I generally ask clients to pay with a check over sending a PayPal payment, though, or use Stripe’s integrations with invoicing tools to pay with a credit card.

In an ideal world where clients are willing to try new things, though, I would ask everyone to use Dwolla. Dwolla costs 25 cents per transaction (look at that adorable flat rate!) and has real humans in charge of customer service. Unlike both PayPal and banks (including my nice, local credit union), I’ve heard almost no stories of problems and even those seem to be either resolved to the customer’s satisfaction or be the results of misunderstandings. The main exception seems to involve using Dwolla to purchase Bitcoin, so I’m not too worried. About 35,000 businesses were using Dwolla as of June, along with several state governmental agencies.

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3 Comments

I wish more of my clients would just do direct deposit as opposed to a paper check! It’s faster and there are no transaction fees on my end.

I didn’t realize Dwolla’s transaction fees were that low (good to know as more clients start using it!), but I also wanted to share a PayPal tip. If you have a FreshBooks account tied to a US PayPal account (I have the free account which only allows a limited number of clients), there’s an option in FreshBooks to pay a flat fee of $.50 in PayPal fees rather than a percentage (NOTE: only if your client also has a US PayPal account; it won’t work for international clients). Still not as cheap as Dwolla, but more of my clients use PayPal. A few clients actually pay the PayPal fee themselves or gross up my pay to cover the fees, which I appreciate.